At the Fed, an Unknown Became a Safe Choice

This article is by Edmund L. Andrews, David Leonhardt, Eduardo Porter and Louis Uchitelle.; Edmund L. Andrews reported from Washington for this article; David Leonhardt, Eduardo Porter and Louis Uchitelle reported from New York.

Published: October 26, 2005

In the summer, a senior administration official summed up the search for a new Federal Reserve chairman this way: ''We've got at least three good choices, but we're not in love with any of them.''

In nominating Ben S. Bernanke to succeed Alan Greenspan as Fed chairman, President Bush selected an economist with stellar credentials and a good reputation in Congress and on Wall Street who has won widespread plaudits since being named on Monday.

But Mr. Bernanke was also an out-of-the-ordinary choice. Virtually unknown outside of academia four years ago, in recent months he emerged as a front-runner, leaping ahead of veteran Republicans who have advised Mr. Bush for years and helped engineer his huge tax cuts of 2001 and 2003.

It was a remarkable ascent to the most powerful economic post in the nation, especially given Mr. Bush's tendency to promote people from a small circle of colleagues and advisers he has known for years and trusts implicitly.

In settling on Mr. Bernanke, President Bush avoided embroiling himself in another confirmation fight at a time when Republicans and Democrats alike are questioning his nomination of Harriet E. Miers to the Supreme Court. But in doing so, he essentially chose a candidate who would satisfy others -- investors on Wall Street, lawmakers in Congress -- more than himself or his Republican base.

Mr. Bernanke was not the first choice of ardent supporters of supply-side economics, who favor deep tax cuts and tight monetary policy as the best medicine to strengthen the economy. They tended to favor R. Glenn Hubbard, an architect of Mr. Bush's sweeping tax cuts and one of the leading candidates. Others in the White House leaned toward Martin S. Feldstein, a Harvard economist who served as President Ronald Reagan's chief economic adviser.

Nor was Mr. Bernanke the first choice of Mr. Greenspan, according to people close to the deliberations. Mr. Greenspan quietly pushed for Donald L. Kohn, a Fed governor and political independent who had previously been his chief of staff.

But Mr. Bernanke had what many outsiders wanted: a world-class reputation among economists; credibility on Wall Street; a confidence and an air of political independence that seemed free from hints of cronyism.

''He was the safe choice, somebody with unquestioned qualifications,'' said Bruce Bartlett, a conservative economic analyst who worked under President Reagan and the first President Bush. ''They needed somebody that everybody, including the financial markets, would react positively to.''

Mr. Bernanke's political rise owes much to Mr. Hubbard, who was chairman of President Bush's Council of Economic Advisers from 2001 until early 2003. Mr. Hubbard pushed hard for the White House to name Mr. Bernanke to an open seat on the Fed board.

Two former administration officials said Mr. Hubbard had fended off what he considered inferior candidates favored by Lawrence B. Lindsey, then director of the National Economic Council. ''At the time, nobody had any idea who Ben Bernanke was,'' said one former White House official.

But Mr. Bernanke (pronounced ber-NANK-ee) quickly made an impression at the Fed, speaking out on a wide array of topics about the economy as well as about the central bank's need to become more open and to peg policy to publicly stated inflation targets.

Last spring, Mr. Bush nominated Mr. Bernanke to take over as chairman of the Council of Economic Advisers. The move was widely seen as an effort to gauge Mr. Bernanke's suitability for becoming Fed chairman when Mr. Greenspan's term expired in early 2006.

But one former administration official said the White House had not progressed that far in its thinking about the Fed. Mr. Bush's decision to recruit Mr. Bernanke to the White House came at the urging of N. Gregory Mankiw, who had been Mr. Bush's economic adviser but was returning to Harvard.

Mr. Bernanke, who had just been named to a new term at the Fed and had bought a home on Capitol Hill in Washington, clearly had a longing for Mr. Greenspan's job. At a meeting with reporters shortly after he joined the White House, Mr. Bernanke said he would feel free to advise the president about nominees to empty seats on the Fed board -- but not about nominees for chairman.

The unstated message was that he considered himself a candidate.

Supply-Side Concerns

By Tuesday, there was already some quiet grumbling from ardent supporters of supply-side economics who fretted that Mr. Bernanke might be too conventional to put a distinctively Bush-like imprint on the Fed. ''Supply-siders would have preferred Glenn Hubbard,'' said Michael T. Darda, chief economist at MKM Partners in Greenwich, Conn., and a promoter of supply-side ideas.

By all accounts, Mr. Bernanke is a rigorous and tough-minded economist who has spent his entire career delving into some of the hardest issues in monetary economics. Mr. Bernanke is not ideological, though he is a Republican. He is unlikely to criticize Mr. Bush for his tax cuts, even if the deficit continues to widen, but he is equally unlikely to be a ringing champion for conservative policy goals like privatizing Social Security.